Sony’s Credit Rating Lowered to “Junk” By One Agency

Fitch, one of the financial institutions that decides these things, has declared that Sony’s credit is “junk”. They’ve lowered the Japanese company’s rating from an already pretty poor BB- to BBB-. That’s three rungs down the ladder, apparently.

Basically this means that one institution – although the others are likely to follow suit – says that you’d be a nutter to invest in Sony right now. This rating, also applied to Panasonic in the same report, implies that without dramatic restructuring of business, Sony is at risk of defaulting on its loans in the long-term. It should be noted that, although their credit rating isn’t much to be proud of, they do have a bit of a cash cushion saved up. Sony’s stock average has dropped 72 per cent over the past year.

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The problems for Sony, who has posted seven consecutive quarterly losses, are mostly in their TV division where they’re failing to compete with the likes of Samsung and LG. The report notes that the image sensing arm of Sony’s business (cameras) is still quite strong and we know that the PlayStation department is vibrant and heading for a new generation which is likely to lead to long term profits, even though it is probably costing a lot for the company initially.

It appears that the advice to Sony is to burn the TV department and focus on the things they’re still good at, rather than pushing more effort into a sector they’re falling so far behind in. The report is behind the silly paywall at the FT but a kind soul on GAF has transcribed bits of it.

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18 Comments

  1. This does not mean a thing. Those of us that have followed the financial markets long enough know that rating agencies have a lot of skeletons in their closets. Ratings could be “bought”, the whole financial crises that started in 2007 / 2008 has its origins in the fact that rating agencies had done their job right in the first place. The game devision does allright I think.

  2. Just like the Walkman times came and went, I think they should let their TVs go as well. Long gone are the days when owning a Sony Black Trinitron was the best you could have :p

  3. Puts Sony in a tricky position when trying to raise money to grow.

    WSJ reported on how Sony are issuing a bond to try & raise money, because with a junk credit rating, the interest rates they could borrow at would be prohibitively expensive.

    However sizeable amounts of this bond money Sony are trying to raise is already committed – Spending on an image sensor factory, a bond they issued in 2003 is coming to maturity next year, the Gaikai purchase and further investments in Olympus.

    Basically Sony is raising more to cover existing expenditure because 5 years of losses & further losses on top of those losses has wiped their balance sheet, barring an emergency reserve of ¥600 billion.

    Think Sony’s only way out of this hole isn’t in their control, they’re basically shuffling the deckchairs on the Titanic in the hope they’re still afloat when global demand rises.

  4. I think predominantly it’s all Japanese companies that are suffering due to the relative strength of the Yen and the global economic situation. With no one having any money to spend everyone is competing primarily on price. The Japanese companies are no exception to that despite the fact it is destroying their margins even more than companies based in other countries with weaker currencies.

    Sony have built one of the year’s best LCD TVs in their HX853 models, which are something of a return to form for Bravias, so it would be a shame to see them drop out of the TV market. A smaller model range and a renewed focus on what they do best (design and image quality) seems to be helping.

    Thankfully 3D in the home is dying (fingers crossed the 4K distraction will quickly go the same way) and TV makers can get back to concentrating on qualities like contrast and colour reproduction which make a bigger difference to perceived image quality.

    • I hope home 3D isnt on its arse. Some films can be a bit pants granted. But (most) 3D gaming is brilliant IMO.

      • I actually think Sky3D pisses all over any film I’ve ever seen in 3D

        The football is a bit gimmicky, but other sports work well & the documentaries, particular nature ones are jawdropping in HD 3D

        Movies have sold 3D short, their focus on bumping up ticket price and having to fit the 3D gimmick into a 30sec advert invariably leans towards crap flying out the screen, or poor 3D conversion giving a popup book type layered effect at rather than the incredibly immersive Avatar experience.

        3D TV follows James Cameron’s ideals and goes for immersive over gimmicks, it’s a shame it’s dying out, but movie studios have killed it or are in the process of doing so.

      • The worst thing about 3D films is a 3D film in 2D. You can see all the shit flying towards the camera, constantly, and yet it doesn’t. As it’s in 2D.

        Horrible.

      • I dont have sky, so cant comment, although the (very limited) BBC olympics coverage in 3D was excellent.
        You can tell a film that has been converted to 3D a mile off. As you say with the 3 layers of depth a la pop up book. I have a few films, some are better than others.
        But for me gaming is where its at as far as 3D is concerned. Probably have 20 ish 3D games. Although yes, there are a couple of duffers (Enslaved, COD and sadly KZ3) You cant fault how much immersion the depth adds to games like Uncharted, Wipeout, R&C and GOW (I could go on). Gears 3 is pretty cool even with so little 3D support on 360, although it does look like you’re a running uphill all the time! I hope 3D gaming is here to stay as in my opinion it is only a good thing.

        And I’d just like to add ‘£d’ .Because I almost typed it 10 times instead of 3D, seems a shame to leave it out now :)

    • I’m sure their top models are still great but it’s the lower price ranges where Samsung is simply destroying Sony’s sales. They have to come out with well designed mid range TVs at prices that average Joe can afford.

  5. American rating agencies giving foreign companies and countries bad ratings? well, i never…

  6. Well their Products are not “Junk”. Unlike another company i can think of in the gaming World LoL:D

    • I do agree that LJN did release a lot of crap on the NES. Although what have they got to do with sony?

    • How dare you insult the phenomena League of Legends.

  7. I was mentioning this not two weeks ago. Sharp are in the same boat too, I think.

    It’s that negative momentum that needs to be stopped (before it can be reversed). They’re slowly getting there but it has to be done before time runs out. Fingers crossed, if all else fails they’ll finally lop a few arms off (Playstation, etc) and finally let that be profitable without other divisions holding it back.

  8. Been saying this for a while, it’s only so long before investors will want out. They can’t keep making a loss. Hoping the world economic woes will disappear is ridiculous, because it’s going to be a long time before that wound has healed.

  9. Japan’s economy as a whole has been pretty crappy for years, so Sony are probably being tainted by that as much as their own weaknesses (not that the rest of the world has really been tearing ahead of course!)

    Does make you wonder if they’d be better off dumping the TV business completely, but to do so would be such an admission of failure I’m not sure they’d be able to pull it off. Maybe they’d be better off dumping all the non core markets they’ve got into (music, films, mobile phones etc) and get back to the heyday of being a premium home entertainment brand. Glad I’m not making that call!

  10. I think this article on the BBC just about sums their position. They really have wasted what was such a strong position.
    http://www.bbc.co.uk/news/business-20449083

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